clpr20230630

clpr20230630_10q.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-38010

CLIPPER REALTY INC.

(Exact name of Registrant as specified in its charter)

Maryland

47-4579660

(State or other jurisdiction of incorporation or

organization)

(I.R.S. Employer Identification No.)

4611 12th Avenue, Suite 1L

Brooklyn, New York 11219

(Address of principal executive offices) (Zip Code)

(718) 438-2804

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.01 per share	CLPR	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☒
Non-accelerated filer ☐	Smaller reporting company ☒
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 3, 2023, there were 16,063,228 shares of the Registrant’s Common Stock outstanding.

TABLE OF CONTENTS

		Page
PART I – FINANCIAL INFORMATION

CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS

ITEM 1.	CONDENSED FINANCIAL STATEMENTS
	CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2023 (UNAUDITED) AND DECEMBER 31, 2022	3
	CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022 (UNAUDITED)	4
	CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022 (UNAUDITED)	5
	CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022 (UNAUDITED)	6
	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)	7
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	22
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	30
ITEM 4.	CONTROLS AND PROCEDURES	30


PART II – OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	30
ITEM 1A.	RISK FACTORS	31
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	31
ITEM 4.	MINE SAFETY DISCLOSURE	31
ITEM 6.	EXHIBITS	31
SIGNATURES		32

PART I – FINANCIAL INFORMATION

CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS

All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q for Clipper Realty Inc. (the “Company”), including, without limitation, statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” regarding the Company’s financial position, business strategy and the plans, objectives, expectations, or assumptions of management for future operations, are forward-looking statements. When used in this Quarterly Report on Form 10-Q, words such as “may,” “will,” “should,” “could,” “expect,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “believe,” “expect,” “intend,” “continue,” “potential,” “plan,” “goal” or other words that convey the uncertainty of future events or outcomes are intended to identify forward-looking statements, which are generally not historical in nature. These statements involve risks and uncertainties that could cause actual results to differ materially from those described in such statements. These risks, contingencies and uncertainties include, but are not limited to, the following:

●

the impact of the recent increase in inflation in the United States which could increase the cost of acquiring, replacing and operating our properties

●

market and economic conditions affecting occupancy levels, rental rates, the overall market value of our properties, our access to capital and the cost of capital and our ability to refinance indebtedness;

●

economic or regulatory developments in New York City;

●

the single government tenant in our commercial buildings may suffer financial difficulty;

●

changes in rent stabilization regulations or claims by tenants in rent-stabilized units that their rents exceed specified maximum amounts under current regulations;

●

our ability to control operating costs to the degree anticipated;

●

the risk of damage to our properties, including from severe weather, natural disasters, climate change, and terrorist attacks;

●

risks related to financing, cost overruns, and fluctuations in occupancy rates and rents resulting from development or redevelopment activities and the risk that we may not be able to pursue or complete development or redevelopment activities or that such development or redevelopment activities may not be profitable;

●

concessions or significant capital expenditures that may be required to attract and retain tenants;

●

the relative illiquidity of real estate investments;

●

competition affecting our ability to engage in investment and development opportunities or attract or retain tenants;

●

unknown or contingent liabilities in properties acquired in formative and future transactions;

●

the possible effects of departure of key personnel in our management team on our investment opportunities and relationships with lenders and prospective business partners;

●

conflicts of interest faced by members of management relating to the acquisition of assets and the development of properties, which may not be resolved in our favor;

●

a transfer of a controlling interest in any of our properties that may obligate us to pay transfer tax based on the fair market value of the real property transferred;

●

the need to establish litigation reserves, costs to defend litigation and unfavorable litigation settlements or judgments; and

●

other risks and risk factors or uncertainties identified from time to time in our filings with the SEC.

ITEM 1. CONDENSED FINANCIAL STATEMENTS

Clipper Realty Inc.

Consolidated Balance Sheets

(In thousands, except for share and per share data)

	June 30, 2023			December 31, 2022
	(unaudited)
ASSETS
Investment in real estate
Land and improvements	$	571,988		$	540,859
Building and improvements		718,661			656,460
Tenant improvements		3,406			3,406
Furniture, fixtures and equipment		13,062			12,878
Real estate under development		66,361			142,287
Total investment in real estate		1,373,478			1,355,890
Accumulated depreciation		(198,825	)		(184,781	)
Investment in real estate, net		1,174,653			1,171,109
Cash and cash equivalents		16,342			18,152
Restricted cash		14,731			12,514
Tenant and other receivables, net of allowance for doubtful accounts of $175 and $321, respectively		5,169			5,005
Deferred rent		2,546			2,573
Deferred costs and intangible assets, net		6,418			6,624
Prepaid expenses and other assets		5,960			13,654
TOTAL ASSETS	$	1,225,819		$	1,229,631

LIABILITIES AND EQUITY
Liabilities:
Notes payable, net of unamortized loan costs of $9,803 and $9,650, respectively	$	1,176,956		$	1,161,588
Accounts payable and accrued liabilities		15,319			17,094
Security deposits		8,660			7,940
Below-market leases, net		1			18
Other liabilities		5,353			5,812
TOTAL LIABILITIES		1,206,289			1,192,452
Equity:
Preferred stock, $0.01 par value; 100,000 shares authorized (including 140 shares of 12.5% Series A cumulative non-voting preferred stock), zero shares issued and outstanding		—			—
Common stock, $0.01 par value; 500,000,000 shares authorized,16,063,228 and 16,063,228 shares issued and outstanding, respectively		160			160
Additional paid-in-capital		89,127			88,829
Accumulated deficit		(81,883	)		(74,895	)
Total stockholders’ equity		7,404			14,094
Non-controlling interests		12,126			23,085
TOTAL EQUITY		19,530			37,179
TOTAL LIABILITIES AND EQUITY	$	1,225,819		$	1,229,631

See accompanying notes to these consolidated financial statements.

Clipper Realty Inc.

Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
REVENUES
Residential rental income	$	25,040		$	22,597		$	48,980		$	44,059
Commercial rental income		9,503			9,290			19,230			19,878
TOTAL REVENUES		34,543			31,887			68,210			63,937

OPERATING EXPENSES
Property operating expenses		6,782			6,928			14,881			14,467
Real estate taxes and insurance		8,700			7,886			17,236			15,817
General and administrative		3,396			3,197			6,689			6,139
Transaction pursuit costs		357			92			357			516
Depreciation and amortization		7,269			6,732			14,094			13,437
TOTAL OPERATING EXPENSES		26,504			24,835			53,257			50,376

INCOME FROM OPERATIONS		8,039			7,052			14,953			13,561

Interest expense, net		(11,334	)		(10,005	)		(21,469	)		(19,990	)
Loss on extinguishment of debt		—			—			(3,868	)		—

Net loss		(3,295	)		(2,953	)		(10,384	)		(6,429	)

Net loss attributable to non-controlling interests		2,046			1,834			6,448			3,992
Net loss attributable to common stockholders	$	(1,249	)	$	(1,119	)	$	(3,936	)	$	(2,437	)

Basic and diluted net loss per share	$	(0.10	)	$	(0.08	)	$	(0.29	)	$	(0.18	)

See accompanying notes to these consolidated financial statements.

Clipper Realty Inc.

Consolidated Statements of Changes in Equity

(In thousands, except for share data)

(Unaudited)

	Number of common shares		Common stock		Additional paid-in- capital		Accumulated deficit			Total stockholders’ equity			Non- controlling interests			Total equity
Balance December 31, 2022		16,063,228	$	160	$	88,829	$	(74,895	)	$	14,094		$	23,085		$	37,179
Amortization of LTIP grants		—		—		—		—			—			648			648
Dividends and distributions		—		—		—		(1,526	)		(1,526	)		(2,822	)		(4,348	)
Net loss		—		—		—		(2,687	)		(2,687	)		(4,402	)		(7,089	)
Reallocation of noncontrolling interests		—		—		123		—			123			(123	)		—
Balance March 31, 2023		16,063,228	$	160	$	88,952	$	(79,108	)	$	10,004		$	16,386		$	26,390
Amortization of LTIP grants		—		—		—		—			—			783			783
Dividends and distributions		—		—		—		(1,526	)		(1,526	)		(2,822	)		(4,348	)
Net loss		—		—		—		(1,249	)		(1,249	)		(2,046	)		(3,295	)
Reallocation of noncontrolling interests		—		—		175		—			175			(175	)		—
Balance June 30, 2023		16,063,228	$	160	$	89,127	$	(81,883	)	$	7,404		$	12,126		$	19,530

	Number of common shares		Common stock		Additional paid-in- capital		Accumulated deficit			Total stockholders’ equity			Non- controlling interests			Total equity
Balance December 31, 2021		16,063,228	$	160	$	88,089	$	(61,736	)	$	26,513		$	43,436		$	69,949
Cumulative-effect adjustment		—		—		—		(2,291	)		(2,291	)		(3,755	)		(6,046	)
Amortization of LTIP grants		—		—		—		—			—			495			495
Dividends and distributions		—		—		—		(1,526	)		(1,526	)		(2,662	)		(4,188	)
Net loss		—		—		—		(1,318	)		(1,318	)		(2,158	)		(3,476	)
Reallocation of noncontrolling interests		—		—		126		—			126			(126	)		—
Balance March 31, 2022		16,063,228	$	160	$	88,215	$	(66,871	)	$	21,504		$	35,230		$	56,734
Amortization of LTIP grants		—		—		—		—			—			714			714
Dividends and distributions		—		—		—		(1,526	)		(1,526	)		(2,747	)		(4,273	)
Net loss		—		—		—		(1,119	)		(1,119	)		(1,834	)		(2,953	)
Reallocation of noncontrolling interests		—		—		177

SEC Form 10-Q filed by Clipper Realty Inc.